We spent much of this session belaboring the soon-to-be-mistaken notion that the broad averages were headed higher. In fact, stocks were bound for collapse the next day, notwithstanding the fact that the E-Mini S&Ps had generated a very powerful bullish impulse leg a day earlier. The lesson here is that it’s okay to trust your gut feelings, but always to verify them by monitoring impulse legs on the lesser charts. In this case, a signal to get short was triggered on the 5-minute chart just five points off the high of a very nasty selloff. Not all went awry for us, incidentally. The reiteration of a bearish call on crude, for one, in the face of a sharp rally was borne out by a plunge in prices the next day.
